SIF-1-Intro Interest Rate, Instruments & Fixed Income
SIF- NISM Series XIII - Common Derivatives Examination
1 / 20
1. What is the key risk in bond trading due to changing market interest rates?
Price or interest rate risk arises due to bond prices moving inversely to interest rates.
2 / 20
2. Which bond has the highest sensitivity to interest rate changes?
Zero-coupon bonds have no interim cash flows, making them highly sensitive to rate changes.
3 / 20
3. The purchasing power of currency changes on account of which of the following?
4 / 20
4. A bond with both call and put options provides rights to:
Call and put options allow both issuer and investor to redeem early under certain conditions.
5 / 20
5. Which of the following is a characteristic of fixed income securities?
Fixed income instruments provide fixed payments (e.g., coupons) and have defined maturity dates.
6 / 20
6. Which of the following is a secured debt?
Secured debt is backed by assets (collateral).
7 / 20
7. If the inflation rate is 6% and the nominal rate is 9%, what is the real interest rate?
Real Rate ≈ Nominal Rate – Inflation Rate = 9% – 6% = 3%.
8 / 20
8. What does Actual/360 day count convention imply?
In Actual/360, days are counted accurately in period but year is assumed to have 360 days.
9 / 20
9. Which bond type pays no interest initially but offers higher payments later?
Deferred coupon bonds delay interest payments but offer higher future payouts.
10 / 20
10. What is the nominal interest rate?
"Rate after adjusting for inflation" That is the real interest rate, which removes the effect of inflation:Real Rate = Nominal Rate − Inflation
Real Rate = Nominal Rate − Inflation
"Rate after compounding"→ Incorrect. That is the effective interest rate, which includes compounding periods (e.g., semi-annually, quarterly).
"Return after taxes"→ That is called post-tax return, not nominal rate.
The nominal rate is the stated or coupon rate on the bond before any adjustment for inflation
11 / 20
11. Which yield curve indicates a possible recession?
Inverted yield curve implies short-term rates are higher than long-term, often preceding recessions.
12 / 20
12.
Credit spread compensates for credit/default risk above the risk-free rate.
13 / 20
13. What happens to the effective interest rate when compounding frequency increases?
Compounding more frequently leads to a higher effective annual rate.
14 / 20
14. What does the term "dirty price" of a bond include?
Dirty Price = Clean Price + Accrued Interest.
15 / 20
15. In the formula FV = PV * (1 + r)^t, what does 'r' represent?
‘r’ is the periodic (compounded) interest rate used in future value calculation.
16 / 20
16. Inflation-indexed bonds protect against:
These bonds adjust payout based on inflation indexes like CPI or WPI.
17 / 20
17. The yield curve showing higher long-term interest rates than short-term is called:
A normal yield curve is upward sloping, reflecting higher yields for longer maturities.
18 / 20
18. What is the yield curve shift where all interest rates move up or down equally?
A parallel shift means all yields move by the same magnitude.
19 / 20
19. What is a risk-free rate?
Sovereign bonds in local currency are considered risk-free since the government can print currency.
20 / 20
20. What does a zero-coupon bond offer?
Zero-coupon bonds are issued at a discount and pay no interim interest.
Your score is
The average score is 62%
Restart quiz
Sign in to your account
Remember me
